Subject: Re: Unite Group (UTG), UK, falling knife.
> "It would be entirely plausible to me if the number of foreign students in the next 25 years averaged half the recent peak, say."

Is it within the realms of possibility? Sure. I mean, a major global war lasting 5-10 years, WW2 style, would have that impact all by itself.

However, the countries with highest population growth today have quite strong connections with the English language and the UK, and are geographically closer to the UK than they are to the US or Canada.

The global population is 8 billion and isn't expected to stop growing till the 2080s at 10+ billion people. That's a natural 25% boost for any rational starting point. And many of those countries don't have existing higher ed infrastructure/teachers for all the young people who are growing up.

A more reasonable assumption would be that the number of foreign students in the UK increases by 15% from the recent peak in 25 years time, from population growth, and probably more like 25% given where the growth is occuring, given modern geopolitics, and given increasing positive vibes between the EU and UK with Brexit.

Still, let's play with the idea. Half as many foreign students arrive, 25 years from now. Zero problem for Unite! Why?

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1. Where are they all studying? High tariff unis. You're not travelling across the world and paying UK tuition fees to study in the shittiest university you can find, unless you really, really have to. If you operate a fine dining restaurant in New York, it does not matter that some people lose their taste for McDonalds.

The UK has 150 universities, ish. 260 if you include colleges and art schools etc. Unite only operates in 60 of them, and it's mostly the best ones, and within 5-10 years, it will be even more so.

2. Unite are moving more and more towards the model where the university takes on all the economic risk for filling rooms with room rates on long-term RPI/CPI linked contracts rather than selling at market rates. Less profit but allows bigger projects and less volatile income. These are called nomination agreements.

They had about 50% nomination agreements a couple of years back and it's already up to 60% now, and as of late 2025 they have indicated almost all new projects will be tied to long term nomination agreements. So given the progress and direction to date - 25 years in the future, it should hopefully be 100% nomination agreements, and all financial risks from voids fall to the university, not Unite.

So, to sum up the scenario being proposed for fun, it is a strange kind of fun, because:

a) isn't very likely, since it doesn't correspond with any reasonable assumption about the world today or in the future, it would be an extreme outlier.

b) it wouldn't affect the universities where Unite operates.

c) it will be the university's problem, not Unite's.

Bluntly, you could model that international students coming to the UK drop to 0 by 2050 because a plague from outer space wipes out all life outside these hallowed isles, and it won't make very much difference to 'Unite 2050', because of (b) and (c) and structural undersupply across the country that isn't being met.

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> "This academic year, non-UK students are already down about 15% from their peak in 2022/23 of 758870, so 50% drop from peak would be a drop of 41% from current numbers."

The UK has long been the second most popular destination for international students, after the USA. People like to study abroad, for prestige (poor countries) and fun (rich countries). The US has long had the big draw of high wages post-university (+ 'The American Dream') and also, proper democracy - "Truth, Justice and the American way". However...

I don't know if you have university-age children or grandchildren, but if you do -

a) if they told you they wanted to study in the US instead of Canada/Europe, would you have supported/encouraged that in 2010?

b) if they told you they wanted to study in the US instead of Canada/Europe in 2026...

I know many hundreds of people in countries all around the world, but I don't know even a single person who is interested in moving to the US for work, life, study etc right now. That's kind of a big deal. Yet we are only 1 year into a 4 year Trump term. It remains to be seen what else he might do during his term.

In terms of 'Trump so far', I think we are yet to see the full impact of US study demand shifting elsewhere, since students entering accom are e.g. 18 months behind political events when they first start to apply to the uni, get a visa, etc, and we're only just past 12 months since Trump took office.

That demand has to go somewhere. The US is the biggest supplier of education to international students, and the UK is the second biggest.

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Take a look here, at the colourful graph, which is for last year and before (2024-2025):

https://gslglobal.com/2026/02/...

The main impact of visa changes etc in 2024 is that applications from Nigeria and India dropped sharply.

If you scroll down the page a little, to the newest data on UCAS applications 2026...

International UCAS applications hit a record high for 2026. Countries like China that previously had a falling number of applications, saw a jump of 10%.

(Particularly good news for Unite, since they specifically offer a Chinese platform for students moving to the UK seeking uni accomodation.)

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> "(as an aside, EU students now make a pretty negligible percent of the total UK university student population, under 3%)"

This is partly Brexit, and partly because of the closure of the Erasmus scheme during Brexit.

The Erasmus scheme was formally approved to restart Dec 2025 and is restarting in practice as of Jan 2027.

The number of EU students halved from 150000 to 75000 after Brexit/Erasmus ending.

Suddenly, instead of fee waivers etc or UK domestic fees, they had to pay full international rates. Not cool.

With Erasmus re-opening, it will move back up again. The UK government is spending about £570 million *per year* starting Jan 2027 to waive university tuition fees for EU students and operate the program.

It is expected to cover about 100000 EU student positions per year, whereas the old Erasmus only saw 30000 (of 150000) (since there were other fee partial waivers under EU membership). TBH it looks like bridge funding to EU membership application in a few years.

I would suppose a realistic scenario is within a year or two, EU students will be heading up towards 150000 again and potentially even higher. Of course, some of this will be people currently paying fees who will move to Erasmus instead to save money. So I wouldn't just add 100k onto 75k.

The effect could be quite positive for Unite, because these students generally come from countries that can afford higher-end accomodation, and generally I would expect them to be chasing positions at the high-end universities where Unite operate.

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> "Presumably some of those vacated beds would be taken up by UK students instead"

I feel this is missing the point about the business model, especially if you're looking 25 years ahead and extrapolating the direction of the past few years and current direction.

Here is how nomination agreements work: Unite lets out the whole building to the university and maintains it. The university pays for all the beds. Unite & the university work together to fill them. Empty rooms? That's a problem for the university, not for Unite. Unite still gets paid in full.

There is a secondary type of nomination agreement called 'soft nomination' where the university agrees to promote/cheerlead for a provider and tries to help them fill rooms as much as possible, or only takes on a 1 year commitment to cover the cost of voids at a time, rather than long term. I think it's fair to say, Unite doesn't like that model very much.

Most of Unite's nomination agreements are 'hard' nomination, i.e. the uni takes the economic risk of empty rooms, and Unite have moved (and are moving faster and faster) towards more hard nomination, especially at prestige universities, as the business model.

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> It's hard to say what the impact of that would be on Unite. I suspect it would leave them lossmaking until a major retrenchment/restructuring was undertaken, with very unpleasant consequences for shareholders, but would not wipe out the company itself.

The assumptions being made in the 'just for fun' scenario about Unite's business model, 'family geopolitics', global population trends, etc don't seem to correspond well with the reality of how it is, past, present and also Unite's current & future money being spent on projects (location & nomination).

I mean... suppose I write a post about... what if Buffett's replacement decides to sell everything legacy and go big on AI hype stocks and options trading. It's certainly fun to math out the tax impact etc and the new Berkshire '2 grove model' of insurance and options trading, but it's not really a great way to evaluate where Berkshire might be in 25 years.

(I know that scenario sounds impossible, but strange things sometimes happen... see link below about one of the UK's oldest investment trusts and how much they changed in the last 10 years)

https://uk.finance.yahoo.com/n...

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Finally, the impact of very old university halls becoming unsuitable for use after many years should be considered, which is removing vast numbers of rooms from the equation. Remember, construction generally and PBSA in particular has totally collapsed in the UK. That is why Unite is warning about the *urgent need* for *far more* PBSA in the UK, despite oversupply in certain cities. There is strong undersupply in other cities, and old accomodation falling away over time, but 2026 construction costs are so high (plus the effect of e.g. regulations, e.g. BSA G2, local NIMBY-style blocking attempts) that it's impossible to justify building more PBSA at the moment. So what happens? Rent goes up fast at the places that do exist.

Think, two-speed market. Same as with offices in London. Some places, have awful occupancy around 60%, yet others have 100% and a queue out of the door if anything becomes available.

To give an idea how much the PBSA market is in undersupply, there is a *shortfall* of 620k beds across the UK. Some cities have too much, but others, well, that's why you see most of Unite's properties are sitting at 99-100% occupancy.

So how much supply is being produced to meet that shortfall? Just 20k beds per year in 2025 and continuing to fall into 2026! It will take 30-50 years of building at current rates *just to meet the level of need for accomodation that already exists in 2025*. Think about that for a moment. And that is before you add in the effects of ancient student accomodation becoming unsuitable for use.

Imagine if I made up a narrative like, UK businesses need 30,000 warehouses of space, but there are only 20,000 available nationwide, and worse, warehouse-building companies have used up all their capital putting giant warehouses in the wrong parts of the country based on where the industry/need has moved.

Sure, you might wonder about 'just for fun' scenarios in the year 2050 where UK industry collapses a bit and they only need 29000 warehouses, or 28000. That's not the issue though, in that example, or with PBSA today. The issue is that there's a structural massive undersupply, and it will lead to very high occupancy and astronomical LFL rent increases in some places, yet quite bad results in a few random markets where too much was built *and* demand is falling in that location -> leading to repurposing and transformation of use in those places, but also, impairment of investment - which has been written into the book value/NAV already.

There will be an issue of some demand destruction too! High high prices will cause choice of university to shift around as people look for places they can actually afford to live. Some people will give up university altogether. The UK government is already working to address this by looking into changing how student debt works to make university more affordable to more people.

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On top of that, in the UK, property is affected by something called EPC requirements*, and these are being continually upgraded every couple of years e.g. to drive insulation / energy efficiency at national level. Drafty ancient halls of residence are OUT. Crappy walls, windows and doors are OUT. And do universities have heaps of capex money lying around to totally redo all that stuff? Not really.

This EPC issue is likely to accelerate because of Trump - I mean, just today, the UK announced they're rushing through special approval for home wall-connected microinverter 0.8kW solar panel systems at INSANE political speed (by british standards) to try and boost energy independence from oil. (it's a great move, btw)

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Hope there is something useful for you or others here, in these ramblings...

Please fact check anything that matters to your own investing in this post - I have fact-checked myself as I went along, as best as I can, but I don't want anyone to rely on that.

TRS

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* It's my understanding that EPC is currently an issue for e.g. LandSec and British Land, other office property operators, basically, it seems that if they don't drop a ton of capex into old offices to replace the doors walls and windows, ventilation etc, those offices can become very hard to rent or sell. Equally, where REITs did actively upgrade old commercial property EPC with meaningful amounts of capex, it resulted in better yields, e.g. 30% rental improvement. Companies that have ESG policies or are trying to be included in ESG indices pay particular attention to this EPC stuff. Unite is in relatively good shape here with a relatively modern portfolio of properties. (There's a complexity, I believe, in that you are obliged to do this EPC stuff in order to keep renting the property out, but there's no guarantee that the tenant can actually pay the correspondingly higher rents on the other side... so far, good results, but if every office gets upgraded, will that still be true?)

Another issue for e.g. office REITS (and lately, Unite), is that when you're trading at a discount to NAV, it's quite hard to come up with a big pile of fresh cash to do any essential capex and fix up those old stuff without diluting the hell out of existing shareholders, so in the office sector you end up with voids / low occupancy instead (look at the breakdown by subsector in their reports). It's presumably hard even to sell the old offices unless you can find someone who has the cash to buy them (despite high rates) *and* do the necessary capex *and* sit with a void while the EPC upgrade work is done. If a company can't raise new capital from equity placing etc, and has maxed out borrowings, then there is also 'capital recycling' where companies sell off the property they can't afford to fix, to raise funds to fix up other property. Kind of , snake swallowing its own tail kind of thing, but, that can still work out, as we see with Unite buybacks. A REIT called SREI is apparently quite good at it. Anyway, as far as capex affects Unite, it's good they have cancelled less attractive projects rather than pushing ahead regardless e.g. empire-building, it's good they have a far lower LTV than LandSec/British Land and vast amounts of room to expand debt if its ever needed, and it's good they are having great results selling non-core property at book price.

https://www.whitecase.com/insi...